Quality investment strategies in a complementary supply chain with an unreliable supplier

Abstract

<p style='text-indent:20px;'>This study investigates investment strategy in a supply chain that comprises one manufacturer and two complementary suppliers - a reliable supplier and an unreliable supplier. The unreliable supplier's quality improvement capacity is uncertain. Where the manufacturer determines to invest in which suppliers' quality improvement activities and suppliers decide the quality improvement levels of their components, respectively. We demonstrate three potential strategies to highlight the manufacturer's and suppliers' optimal choices: investing in an unreliable supplier, investing in a reliable supplier, and investing in both. Investing in two suppliers results in higher quality improvement levels and profits for the manufacturer, and the optimal level of product quality improvement is not monotonically related to the efficiency rate. The unreliable supplier can benefit the most from the investment strategy, while the manufacturer profits the least. The uncertainty of an unreliable supplier is more likely to affect a reliable supplier than himself. There are two effects: mutual hold-up and spillover effects result in counter-intuitive findings. Lastly, we relax our assumptions to examine their impacts on the manufacturer's strategy choice.</p>

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“…For instance, a poorly balanced operating line can cause equipment to operate outside its design limits, leading to increased wear and tear and a reduced equipment lifespan. Therefore, maintaining a balance of operating lines is crucial to ensuring safe and efficient production processes, reducing operational costs, and improving product quality (Wang, Song, Shi, Zhang, & Gong, 2023). As such, it is important to implement proper 675 Nurture: Volume 17, Issue 4, 672-683, 2023 Online ISSN: 1994-1633/ Print ISSN: 1994-1625 DOI: 10.55951/nurture.v17i4.462| URL: www.nurture.org.pk monitoring and control systems that can detect and correct imbalances in operating lines promptly (Bin, Yong, Wenhao, & Yu, 2023;Özceylan et al, 2019;Özden & Tahsin, 2023).…”